U.S. Treasury yields were mixed last week and spread sectors outperformed as fourth quarter U.S. GDP exceeded expectations. The market continues to price in a 50% chance of a U.S. Federal Reserve rate cut by March, and around five total cuts for this year.
Weekly fixed income update highlights
- Total returns were positive across most major asset classes, including Treasuries, investment grade and high yield corporates, preferreds, senior loans and emerging markets.
- Municipal bond yields were mixed. New issue supply was $8.3B and fund inflows were $211M. This week’s new issuance is estimated to be a light $4.5B.
Watchlist
- The 10-year U.S. Treasury yield fell slightly last week, and we anticipate declines in overall rates in the months ahead.
- Spread assets broadly outperformed Treasuries.
- Increased seasonal supply should provide an attractive entry point for municipal bonds.
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